BKR · Q4 2025 Earnings

Bullish

Baker Hughes

Reported January 26, 2026

30-second summary

Q4 revenue of $7.39B was flat YoY but adjusted EBITDA of $1.337B beat the $1.255B guide by $82M, with IET hitting 20.0% EBITDA margin — the 2026 target pulled forward a full year. Management initiated FY2026 EBITDA guidance at $4.85B, essentially flat vs FY2025 actual $4.83B but implying mid-single-digit organic growth (excluding PSI/SPC divestitures). Data center order outlook doubled to ~$3B for 2025-2027, and the 20% total-company EBITDA margin target by 2028 was reaffirmed. OFSE remains the drag — FY2026 revenue guided to $13.75B (-4% YoY, flat organic) with upstream spending expected down low-single-digits and the OFSE inflection now explicitly pushed to 2027.

Headline numbers

EPS

Q4 FY2025

$0.78

Revenue

Q4 FY2025

$7.39B

+0.0% YoY

Gross margin

Q4 FY2025

23.8%

Free cash flow

Q4 FY2025

$1.34B

Operating margin

Q4 FY2025

7.1%

Key financials

Q4 FY2025

Metric	Q4 FY2025	YoY	Q3 FY2025	QoQ
Revenue	$7.39B	+0.0%	$7.01B	+5.4%
EPS	$0.78	—	$0.68	+14.7%
Gross margin	23.8%	—	—	—
Operating margin	7.1%	—	—	—
Free cash flow	$1.34B	—	$0.70B	+91.8%

Guidance

Guidance is issued for the full year only, refreshed each quarter. Prior and new below are the same FY updated this quarter.

Actuals vs prior guidance

Metric	Period	Prior guide	Actual	Δ	Result
Adjusted EBITDA	Q4 FY2025	approximately $1.255 billion	$1.337 billion	+$82 million above guide	Met
IET Adjusted EBITDA	Q4 FY2025	$680 million	$762.8 million	+$82.8 million above guide	Beat
OFSE Adjusted EBITDA	Q4 FY2025	$650 million	$646.6 million	-$3.4 million below guide	Met

New guidance

Metric	Period	Guide	YoY
Organic Adjusted EBITDA growth	FY2026	mid-single digits	—
Free cash flow conversion	FY2026	~50%	—
Effective tax rate	FY2026	22% to 26%	—
IET Orders	FY2026	$13.5 billion to $15.5 billion	—
IET Revenue	FY2026	$13.5 billion	—
IET EBITDA	FY2026	$2.7 billion	—
IET EBITDA margin target	FY2026	20%	—
OFSE Revenue	FY2026	Slightly lower year-over-year, flat organic	—

Changes to prior guidance

Metric	Period	Prior guide	New guide	Δ	Result
Revenue	FY2025	—	$27.733 billion	FY2025 actual reported	Raised
Adjusted EBITDA	FY2026(prior guide for FY2025)	$4.74 billion (prior FY2025 midpoint guidance, now reset)	$4.85 billion	+$0.11 billion	Raised

Segment KPIs

Q4 FY2025

Segment	Q4 FY2025	YoY
Oilfield Services & Equipment (OFSE)	$3.572B	-8.0%
Industrial & Energy Technology (IET)	$3.814B	+9.2%

Other KPIs

Q4 FY2025

Segment	Q4 FY2025
Remaining Performance Obligations (RPO)	$35.9 billion
IET RPO	$32.4 billion
Orders	$7.9 billion
IET Orders	$4.0 billion
Book-to-Bill Ratio	1.1x
IET EBITDA Margin	20.0%
OFSE EBITDA Margin	18.1%
Adjusted EBITDA	$1,337 million

Management tone

Q1 oil-cycle defense → Q2 "margin over share, IET diversifies" → Q3 "age of gas, AI power" → Q4 "industrialized energy solutions, power as the bottleneck."

Power systems has graduated from growth opportunity to supply-constrained bottleneck. Three quarters ago, data centers were a $1.5B three-year target; last quarter, management said they would hit it "ahead of plan"; this quarter, the cumulative 2025-2027 target was doubled to ~$3B with Nova slots already sold through 2028. Simonelli framed the underlying demand as: "AI infrastructure spending totaled more than $500 billion in 2025 and is expected to approach a trillion dollars annually in the late 2020s. Resilient power supply has emerged as a key bottleneck." The language shift from "opportunity" to "bottleneck" is the tone tell — it implies pricing power and order visibility that didn't exist in Q1 framing.

The IET 20% margin target moved from forward commitment to checked box, mid-cycle. Q2 reaffirmed 20% IET margins as a 2026 target; Q3 management was "firmly committed" to 2026; Q4 delivered 20.0% in the actual quarter and guided FY2026 IET EBITDA to $2.7B (vs $2.482B FY2025 actual), pulling the timeline forward by a year. The 2028 total-company 20% margin target was reaffirmed with concrete bridges from Q&A: ~18% in FY2026, ~200bps to go. Q3 had this as a stretch ambition with vaguer building blocks; Q4 it's an execution checklist.

OFSE narrative completed its transition from growth engine to recurring-revenue ballast. Q1 management was defending oil-cycle exposure; Q2 emphasized "margin over share"; Q3 acknowledged "possibly another year of decline" in 2026; this quarter Simonelli was explicit: "we believe further reduction in idled OPEC plus supply alongside more constructive oil supply and demand balances is required before a broad inflection in oilfield services activity emerges. This inflection is likely a 2027 catalyst." Pushing the OFSE up-cycle to 2027 with conviction (vs Q3's hedged "subdued") frees management from defending the segment quarter-to-quarter and reframes BKR as an IET-led story.

M&A narrative shifted from portfolio reshape to strategic capstone. Q2 framed the SPC/PSI/CDC transactions as "$1B in net proceeds"; Q3 elevated Chart to "margin lever"; Q4 positioned Chart as the deliberate culmination of a multi-year power systems build-out: "this portfolio builds on decades of aero derivatives and heavy duty gas turbine technology development, complemented by deliberate organic investment in our NOVA LT gas turbine platform, our acquisition of brush power generation, and the pending acquisition of chart." This is no longer defensive diversification — it's an offensive industrialization narrative.

Recurring themes management leaned on this quarter:

Power systems portfolio as multi-year structural growth opportunity driven by AI/data centers and electrificationIET durability and recurring revenue model underpinning margin expansion and cash flow stabilityOPEX-led business mix reducing cyclicality as company evolves toward industrialized energy solutionsNon-LNG equipment (85% of IET orders) and new energy orders exceeding targets signal end-market diversificationMargin expansion through business system execution, productivity, and pricing optimization despite macro headwindsChart acquisition and portfolio optimization positioning company for 20% EBITDA margins by 2028

Risks management surfaced:

Macro-driven softness in oil field services and equipment with low single-digit revenue declines expected in 2026Geopolitical and trade-related uncertainty persisting through 2026, including tariff-related costsSupply chain tightness and potential foreign exchange headwinds impacting near-term executionOil price volatility and OPEC+ dynamics delaying OFSE sector inflection until 2027Timing of Chart acquisition closing subject to regulatory reviews in certain jurisdictions

Q&A highlights

Arun Jayaram · JPMorgan Chase

Can you elaborate on Baker Hughes' strategy for enhancing power systems capabilities and sustaining growth, given the $2.5 billion in 2025 orders and the Brush acquisition and Nova LT gas turbine opportunities?

Management outlined a comprehensive power systems strategy across multiple end markets: $100 billion annual market opportunity by 2030 driven by data centers, AI infrastructure, and electrification trends. Emphasized diversified portfolio beyond Nova LT, including aerodurative gas turbines (1.3 GW), geothermal (300 MW Fervo order), Brush generators (7 GW), synchronous condensers, energy storage, nuclear steam turbines, and integrated tri-generation solutions. Data center orders projected to reach $3 billion between 2025-2027 (150%+ growth).

$2.5 billion power systems orders in 2025$1 billion of 2025 orders directly from data centers$3 billion data center orders projected 2025-2027$100 billion annual market opportunity by 2030

Scott Gruber · Citigroup

Can you walk through the moving pieces within the $14.5 billion 2026 IEP order intake guidance, including segment growth drivers and what could drive upside, particularly from power?

Management articulated 2026 IEP guidance reflects strength across portfolio with non-LNG equipment delivering 20%+ CAGR since 2023 and representing 85% of total IEP orders. Power systems anchored on $2.5 billion 2025 orders with growing data center pipeline. Gas infrastructure expected to continue growing with increased natural gas production. New energy set record $2 billion in 2025 with $2.4-2.6 billion forecast, led by CCUS, Flex Fuel Power, and geothermal. Part of $40+ billion three-year Horizon 2 target (2026-2028).

$14.5 billion 2026 IEP order intake guidance$40+ billion three-year order target (2026-2028)Non-LNG equipment: 20%+ CAGR since 2023Non-LNG represents 85% of total IEP orders in 2024-2025

Saurabh Pant · Bank of America

Can you walk through the margin drivers for both OSSC and IEP segments in 2026, including how cost actions are offsetting headwinds like mix, pricing, and tariffs?

Management detailed segment-specific margin expansion: IEP targeting 20% margins in 2026 (150 bps YoY improvement, 500 bps since 2023) driven by conversion of higher-margin gas tech backlog, gas tech services growth, Gordon orders providing operating leverage, and cost optimization. OFSC projected flat organic margins despite 10% revenue decline vs peak 2024, offset by cost actions and structural improvements. Total company margins expected at ~18% in 2026, implying 200 bps improvement toward 20% target by 2028. Headwinds include annualized tariff costs, slight revenue mix shift (SSPS growth vs OFS decline), and market pricing variability.

IEP targeting 20% margins in 2026150 basis points YoY margin improvement expected for IEP500 basis points IEP margin improvement since 2023OFSC margins expected flat organically in 2026

David Anderson · Barclays

Has Baker Hughes expanded Nova LT capacity given the doubling of data center order targets to $3 billion? Are slots sold out through 2027 deliveries, and is this related to the 1 GW slot reservation announced?

Management confirmed Nova LT capacity doubling on track for H1 2027. With planned capacity additions, Nova slots are effectively full through 2028, supporting the 2 GW Nova orders booked to backlog in 2025. Management stated they continue to monitor market and will make further capacity expansion decisions based on disciplined assessment of supply-demand fundamentals and clear return thresholds. Currently fully committed through 2028 but prepared to respond quickly if warranted.

Nova LT capacity doubling planned for H1 2027Nova slots effectively full through 20282 GW Nova orders booked to backlog in 2025Current capacity expansion plan fully committed through 2028

Mark Bianchi · TD Cowan

Can you describe Baker Hughes' opportunity in Venezuela given recent political changes and potential for incremental oil production?

Management outlined Venezuela opportunity across both OFS and IET segments. Historical context: $500 million revenue in 2012. Baker Hughes maintains ongoing presence with largest installed base of oilfield power generation (1,200+ systems) and flexible pipe. Venezuela's aging infrastructure and production decline will require investment in well integrity, off-grid power generation, equipment replacement, and services. Significant upside opportunity across enterprise if production ramps materially. Management taking prudent long-term approach, evaluating opportunities while prioritizing employee safety and seeking clarity on legal/regulatory framework. Characterized as programmatic with ongoing conversations.

$500 million historical Venezuela revenue (2012)1,200+ installed oilfield power generation systemsOne of only American service companies maintaining ongoing presenceLargest installed base of oilfield power generation in country

Answers to last quarter's watch list

Can IET hit ~18.4% FY2025 implied EBITDA margin and credibly bridge to 20% by 2026? IET printed 20.0% EBITDA margin in Q4 alone and 18.5% for the full year, pulling the 2026 target into FY2025 exit. FY2026 IET EBITDA guided at $2.7B on $13.5B revenue — exactly 20%, and ahead of the prior 2026 target framing.

Resolved positively

OFSE EBITDA absolute dollars in Q4 — guide is $650M, requires margins near 18% — OFSE delivered 18.1% margin on $3.572B revenue and $647M EBITDA, $3M below the $650M guide. FY2025 OFSE EBITDA of $2.62B landed in-line with the reaffirmed midpoint. The hidden-cut concern from Q3 didn't widen, though FY2026 OFSE revenue guided -4% YoY to $13.75B.

Resolved positively

The early-October "comprehensive evaluation" disclosure — The Q4 call surfaced no new cost program quantification or capital-structure action beyond the Chart acquisition and the in-flight portfolio sales. Management reiterated Horizon 2 framing and noted "incremental targeted cost-out initiatives with quick cash paybacks" but didn't disclose anything that materially advanced the strategic review beyond what was on the table in Q3.

Continue monitoring

2026 OFSE revenue base case — does it land below $14B? — Management guided FY2026 OFSE revenue to $13.75B vs FY2025 actual $14.32B — a 4% YoY decline, flat on an organic basis (excl. SPC). Below the $14B threshold flagged last quarter, with low single-digit upstream decline expected.

Resolved negatively

Chart deal close timing and any synergy reframe — Management referenced "the pending acquisition of chart" and expects closing in Q2 2026, with timing "may evolve as those processes progress" subject to regulatory reviews in certain jurisdictions. Management reaffirmed increasing confidence in the $325M cost synergy target. The hedge on closing timing is a mild negative for the 2028 margin bridge.

Continue monitoring

What to watch into next quarter

Whether IET FY2026 EBITDA tracks to or above $2.7B in Q1 — Q1 IET EBITDA guided at $600M; the 20% margin target needs to hold not just on a Q4 mix-favorable print but sustainably across quarters; first read on this comes with the Q1 print.

Chart closing timeline and any regulatory friction — management now expects Q2 close but flagged "timing may evolve"; any further slippage past mid-2026 delays the 2028 margin bridge mechanics.

OFSE FY2026 revenue trajectory vs the $13.75B (-4% YoY, flat organic) framing — Q1 OFSE EBITDA guided at $540M; watch whether seasonality and upstream activity validate the full-year glidepath or if the upstream decline runs deeper than low-single-digits.

Data center order pace toward the $3B 2025-2027 target — $1B booked in 2025 leaves $2B over two years; the Q4 1 GW NOVA slot reservation is expected to convert to a firm order in 2026. Watch Q1 power systems order disclosure and Nova LT 2027 capacity allocation commentary.

2027 OFSE inflection setup — management explicitly called 2027 the likely up-cycle catalyst. Watch whether Q1 commentary on international short-cycle activity or OPEC+ supply behavior validates or further delays that timing.

Sources

Baker Hughes Q4 FY2025 Earnings Release, SEC Filing: https://www.sec.gov/Archives/edgar/data/1701605/000170160526000003/earningsreleaseex991123120.htm
Baker Hughes Q4 FY2025 Earnings Call, prepared remarks and Q&A.
Tapebrief Q3 FY2025 Baker Hughes brief (prior watch list and trend context).

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